Table Of Content

W PRODUCER-FUNDED LIVESTOCK RESEARCH AND PROMOTION PROGRAMS Y 4. AG 8/1:103-2 Producer-Funded Livestock Research... HEARING BEFORE THE SUBCOMMITTEE ON LIVESTOCK OF THE COMMITTEE ON AGRICULTURE HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION FEBRUAEY 24, 1993 Serial No. 103-2 Printed for the use of the Committee on Agriculture U.S. GOVERNMENT PRINTING OFFICE 66-346 WASHINGTON : 1993 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-040707-9 W PRODUCER-FUNDED LIVESTOCK RESEARCH AND PROMOTION PROGRAMS Y 4. AG 8/1:103-2 Producer-Funded Livestock Research... V HEARING BEFORE THE SUBCOMMITTEE ON LIVESTOCK OF THE COMMITTEE ON AGRICULTURE HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION FEBRUARY 24, 1993 Serial No. 103-2 ^^^mim W\i- Printed for the use of the Committee on Agriculture U.S. GOVERNMENT PRINTING OFFICE 66-346 WASHINGTON : 1993 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-040707-9 COMMITTEE ON AGRICULTURE E (KIKA) DE LA GARZA, Texas, Chairman GEORGE E. BROWN, Jr., California, PAT ROBERTS, Kansas, Vice Chairman Ranking Minority Member CHARLIE ROSE, North Carolina BILL EMERSON, Missouri GLENN ENGLISH, Oklahoma STEVE GUNDERSON, Wisconsin DAN GLICKMAN, Kansas TOM LEWIS, Florida CHARLES W. STENHOLM, Texas ROBERT F. (BOB) SMITH, Oregon HAROLD L. VOLKMER, Missouri LARRY COMBEST, Texas TIMOTHYJ. PENNY, Minnesota WAYNE ALLARD, Colorado TIM JOHNSON, South Dakota BILL BARRETT, Nebraska BILL SARPALIUS, Texas JIM NUSSLE, Iowa JILL L. LONG, Indiana JOHN A. BOEHNER, Ohio GARYA. CONDIT, California THOMAS W. EWING, Illinois COLLIN C. PETERSON, Minnesota JOHN T. DOOLITTLE, California CALVIN M. DOOLEY, California JACK KINGSTON, Georgia EVA M. CLAYTON, North Carolina BOB GOODLATTE, Virginia DAVID MINGE, Minnesota JAY DICKEY, Arkansas EARL F. HILLIARD. Alabama RICHARD W. POMBO, California JAY INSLEE, Washington CHARLES T. CANADY, Florida THOMAS J. BARLOW III, Kentucky EARL POMEROY, North Dakota TIM HOLDEN, Pennsylvania CYNTHIA A. McKINNEY, Georgia SCOTTY BAESLER, Kentucky KAREN L. THURMAN, Florida SANFORD D. BISHOP, Jr., Georgia PAT WILLIAMS, Montana BLANCHE M. LAMBERT, Arkansas Professional Staff DiANNE Powell, StaffDirector ERNIE HlfeERT, ChiefCounsel and Legislative Director GarAr. Mitchell, Minority StaffDirector 'AMES A. Davis, Press Secretary ^«v»^ Subcommittee on Livestock C0» iLD L. VOLKMER, Missouri, Chairman GARYA. CONDIT, C*; iw^ STEVE GUNDERSON, Wisconsin EAVRiLce'F.CnHdIiLrmLaInARDi,; Alabama TROOBMELRETWIF.S,(BFOlBor)idSaMITH, Oregon .CHARLES W. STENHOLM, Texas JOHN A. BOEHNER, Ohio TIM HOLDEN, Pennsylvania BOB GOODLATTE, Virginia JILL L. LONG, Indiana RICHARD W. POMBO, California COLLIN C. PETERSON, Minnesota CHARLIE ROSE, North Carolina CALVIN M. DOOLEY, California KAREN L. THURMAN, Florida (II) CONTENTS Page Smith, Hon. Robert F. (Bob), a Representative in Congress from the State ofOregon, prepared statement 21 Volkmer, Hon. Harold L., a Representative in Congress from the State of Missouri, openingstatement 1 Witnesses Camerlo, James P., Jr., president, National MilkProducers Federation 23 Prepared statement • •••• 86 Clayton, Kenneth C, Acting Assistant Secretary, Marketing and Inspection Services, U.S. Department ofAgriculture 2 Prepared statement 63 Hall, Terry, dairy farmer, Westminster, MD, on behalf of the Dump the Dairy Board Coalition 27 Prepared statement 108 Hanson, Martha E., chairman. Cattlemen's Beef Promotion and Research Board 48 Prepared statement 133 Huber, Stewart G., president. Farmers Union MilkMarketing Cooperative 28 Prepared statement 109 Johnson, Karl, president-elect, National PorkProducers Council 54 Prepared statement 164 Koons, Dan, president-elect. National Cattlemen'sAssociation 45 Prepared statement • 128 Larson, Larry, chairman, Pork Industry Group, division,ofthe National Live- stockand MeatBoard 58 Prepared statement 187 Larson, Raymond L., chairman. Beef Industry Council, division of the Na- tional Livestock MeatBoard 50 Prepared statement 144 Loper, James H., Jr., chairman. National Dairy Promotion and Research Board 25 Prepared statement 89 McKee, James S., president. National PorkBoard 56 Prepared statement 179 Pope, AlbertE., president. United EggProducers 40 Prepared statement 120 Russo, John, chairman, American EggBoard 42 Prepared statement 125 Submitted Material Loethen, James, president, Missouri Pork Producers Association, letter of February 18, 1993 197 (III) PRODUCER-FUNDED LIVESTOCK RESEARCH AND PROMOTION PROGRAMS WEDNESDAY, FEBRUARY 24, 1993 House of Representatives, Subcommittee on Livestock, Committee on Agriculture, Washington, DC. The subcommittee met, pursuant to notice, at 9:40 a.m., in room 1300, Longworth House Office Building, Hon. Harold L. Volkmer (chairman ofthe subcommittee) presiding. Present: Representatives Hilliard, Stenholm, Holden, Long, Pe- terson, Dooley, Gunderson, Lewis, Smith, Goodlatte, and Pombo. Also present: Representative E (Kika) de la Garza, chairman of the committee. Staff present: John E. Hogan, minority counsel; Dale Moore, minority legislative coordinator; Glenda L. Temple and Jan Rovecamp, clerks; Timothy P. De Coster, Dan McGrath, Perri D'Armond, and John Riley. OPENING STATEMENT OF HON. HAROLD L. VOLKMER,AREP- RESENTATIVE IN CONGRESSFROM THE STATE OF MISSOURI Mr. Volkmer. The subcommittee will come to order. The Subcommittee on Livestock is meeting today to review producer-funded livestock research and promotion programs. This is our first meeting ofthe 103d Congress. It is an honor for me to have been selected by the Agriculture Committee to serve as chairman of the Livestock Subcommittee, and I look forward to a productive session. I note that in the interest ofa new, streamlined organization, we have trimmed our title down tojust the Livestock Subcommittee, although our interests in dairy, poultry, and all other aspects of Uvestock production and management remain un- changed. The four research and promotion programs, or check-offs as they are widely known, that we will focus on today are dairy, eggs, beef, and pork. Producers fund these programs directly from the pay- ments they receive for marketing their animals and products, and the check-offs are carried out without direct Government funding. All of the programs have been authorized by law and approved by producer referenda. All totaled, these four check-offs raise more than $300 million annually for producers or about two-thirds of the fiinds coming from the dairy sector. The programs are designed to improve condi- tions for our producers by improving both the demand for and the quality ofthe products. (1) A check-offrepresents a significant investment by producers, and our purpose in conducting this hearing is to find out how well the We programs are operating. will use this information in assessing whether any changes are needed as we approach the 1995 farm bill. We appreciate the participation ofour many witnesses today and look forward to an informative discussion. Our first panel today is Dr. Kenneth C. Clayton, Acting Assistant Secretary for Marketing, Inspection, and Service, U.S. Department ofAgriculture. He is accompanied by Mr. Will Blanchard, Director, Agricultural Marketing Service, Dairy Division; Mr. Paul Fuller, Director, AMS Livestock and Seed Division, and Michael Holbrook, AMS Director, Poultry Division. Dr. Clayton, your statement will be made a part of the record. You may either summarize that statement or review it in full, however you so desire. You may begin. Welcome. You are our first witness for this Congress. I appreciate your being here. STATEMENT OF KENNETH C. CLAYTON, ACTING ASSISTANT SECRETARY, MARKETING AND INSPECTION SERVICES, U.S. DEPARTMENT OF AGRICULTURE, ACCOMPANIED BY WILL BLANCHARD, DIRECTOR, DAIRY DIVISION, PAUL FULLER, DI- RECTOR, LIVESTOCK AND SEED DIVISION, AND MICHAEL HOLBROOK, DIRECTOR, POULTRY DIVISION, AGRICUL- TURAL MARKETING SERVICE Mr. Clayton. I take that as a high honor, Mr. Chairman, and I thank you very much for the opportunity to meet with you and members ofthe subcommittee this morning. We appreciate this opportunity to appear before the subcommittee to discuss the Department's oversight of commodity research and promotion programs for dairy, beef, pork, and eggs. As you have noted, I am accompanied this morning by Will Blanchard, Di- rector of the Dairy Division, Paul Fuller, Director of our Livestock and Seed Division, and Michael Holbrook, Director of our Poultry Division in the Agricultural Marketing Service. My remarks this morning will be somewhat abbreviated so I appreciate your statement that I will be able to include my full writ- ten testimony in the record. My testimony this morning will focus on the scope of commodity research and promotion efforts at the Federal and State levels, the evolving changes that have occurred in these t5TDes of programs during the last decade, and the Agricultural Marketing Service's role in providing oversight in the administration of the various commodity research and promotion programs. Exhibits I through IV, which are attached to my full testimony, provide, by program, for dairy, beef, pork, and eggs, a summary of the statutory provisions, implementation history, expenditures for fiscal years 1988 through 1992, enforcement actions, and major issues which are currently pending before the respective commodity boards of the De- partment. Mr. Chairman, there are today more than 350 Federal and State legislative promotional programs covering over 80 farm commodities. Some 90 percent of all U.S. producers contribute money to such farm commodity promotion and market development efforts. These are industry self-help initiatives. Collectively, they are gen- erating in excess of $500 million annually to help U.S. producers improve their competitive positions both at home and in world mar- kets. At the Federal level, there are 14 programs currently authorized, some ofwhich are still being implemented. About 80 percent ofthe total funds generated for commodity check-off programs, as they are commonly referred to, are collected pursuant to these 14 feder- ally sanctioned programs. The dairy program, as you noted, is by far the largest with total collections approaching $217 million in 1992, followed by beef which had collections this past year ofalmost $79 million, and pork with $38 million. The egg program generated almost $8 million. Commodity promotion at the State level dates back to over a half century ago when the Florida State Legislature approved legislation for citrus promotion. At the Federal level, involvement in research and promotion programs began in the mid-1950's with the passage of the National Wool Act. However, it was not until the mid-1960's that the current generation of these programs took form. Beginning with the Cotton Research and Promotion Act of 1966, freestanding commodity-specific legislation has been developed that fits the needs ofeach industry. Research and promotion authorities were enacted for the potato and egg industries in the early 1970's. Congress added dairy in 1983 and honey in 1984. Beef, pork, and watermelon were enacted as a part ofthe 1985 farm bill. The 1990 farm bill included authority for another five programs, namely mushrooms, limes, pecans, soybeans, and fluid milk, some ofwhich are still being implemented. These national programs, when fully implemented, are expected to generate in excess of $400 million annually to fund research, promotion, and information activities. This will represent almost a ten-fold increase over the past decade in funds that producers are providing for these national self-help programs. During this 10-year period, we have seen many changes come about as these programs have evolved. For example, prior to 1983 most commodity research and promotion programs had compulsory up-front referenda which required approval by a two-thirds majority ofthose affected. Producers were entitled to refunds on demand. Beginning in the mid-1980's, however, with enactment of the dairy, beef, and pork programs, certain features were modified or eliminated. Among these were the elimination of the refund provision, implementation by a delayed referendum, and changing the required two-thirds vote to a simple majority for approval. The dairy program was the first to be implemented with a delayed referendum. The referendum was conducted in August 1985, well over a year after a staff and an active national advertising program were in place. The dairy statute was also the first not to include a refund provision. The 1985 farm bill contained authorities for both beefand pork which emulated the delayed referendum procedure established in the dairy program. The majority vote provision was made part ofthe legislation gov- erning the dairy and pork programs. And as you know, other programs have subsequently moved in this same direction. The egg program has subsequently followed in the footsteps of the dairy, beef, and pork programs with no refund and delayed referendum provisions being added to its authorizing legislation. The beef and pork programs, unlike the programs for dairy and eggs, also contain authority to assess imports. As you are aware, Mr. Chairman, the authority to assess imports is another feature that has been added to several ofthe more recent programs. A variety of challenges have arisen in implementing these programs, thus affecting AMS's oversight role and policies. A couple of areas I would highlight for the subcommittee this morning are issues surrounding comparative advertising and relationships between commodity boards and trade associations. In the area of comparative advertising, we have discouraged comparisons between commodities and unwarranted claims against competing products are prohibited. An area of increasing concern for AMS as the numbers of these types ofprograms have continued to grow is the relationship which has evolved between some ofthe commodity boards and trade associations. Commodity boards are prohibited by statute from using funds collected to influence governmental policy or action, except in recommending amendments to the order. Congress itself has long expressed its intent in maintaining the integrity of the use of assessment funds and limiting the use of such funds to those purposes for which the acts are intended. To allow the use of assessments for activities that are clearly outside the scope ofthe authorizing legislation would represent both a mis- use and abuse ofsuch funds. We have insisted on strict safeguards and good accounting proce- dures to ensure full accountability on the use of check-offfimds by any trade or producer organizations which are funded wholly or in part by a particular board or who may happen to be contractors to one of the boards. We certainly urge this subcommittee to provide its continuing support to these principles to help assure the integrity ofthese programs. Next I would like to turn to the issue oflegislative guidelines for commodity research and promotion programs. While provisions of existing commodity research and promotion programs vary considerably from one industry to another, it re- mains the Department's position that when research, promotion, and education programs are enacted by Congress, the long-term interests ofthe industry and the general public are best served when such legislation contains the following features. The program must be national in scope and implemented through either an up-front referendum or by a delayed referendum with refunds or an escrow account. The program must provide for appointment by the Secretary of board members with equitable treatment for imports and importer representation on the boards where applicable. It must also include a prohibition on the use of assessment funds for false or misleading advertising as well as a prohibition on the use of assessment funds to influence legislation or governmental policy or action.